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Starting with an exploration of the advertising market’s classic characteristics and organisation, the way it operates and its objectives, IDATE presents the new forms of advertising that are emerging, provides analysis of the assets inherent in the new advertising platforms that are Web 2.0 and mobile, and takes a look at traditional media’s reaction to market changes and their ability to adapt. Also included are market development forecasts for each medium.

The advertising market is a Dynamic sector overall. Between 2006 and 2007, media advertising spending worldwide rose by 5.2%, all media combined – totalling close to 450 billion USD in 2007. TV and print media continue to dominate the advertising market, accounting for more than three quarters of all advertising investments.

“Simply stating that all media are on a growth path masks very different realities for the different media and in the various geographical zones” analyses Florence LeBorgne, Project Manager.

Online advertising spending is enjoying a spectacular increase (+32.4% in 2007 compared to 2006), but ad spending on print media (+0.8%) is stagnating.

More dire still is the fact that print media and TV are losing ground in the most competitive markets, namely North America and Western Europe. Although these remain the richest markets, growth is now concentrated chiefly in Eastern Europe and the Asia-Pacific region – with China expected to become the fourth largest advertising market in 2008, overtaking Germany, while Russia is expected to move from 14th place in 2006 to the number six spot by 2010 (source: ZenithOptimedia).

Internet: an expanding medium
Now reporting 750 million users around the globe who spend an average 11 hours and 20 minutes online every week (European web user in 2006 – Source: EIAA), there is no question that the web has become a mass medium. As a result, it is attracting a growing number of advertisers and enjoying spectacular growth rates.Online ad revenue is forecast to increase by 76% worldwide between 2006 and 2009, compared to an only 16% increase for TV ad revenue and 9.5% for print media. By 2009, the internet is expected to be the number three ad medium, behind print and television.

Three main types of advertising have taken hold on the internet, each with a direct link to the phases in the buying cycle. Display or Sponsorship, search Marketing and Classified.

Search Marketing are the online advertising format of choice for intermediate size companies seeking to generate higher sales. The success of search marketing is tied to:
- its proven efficiency: it offers transformation rates that are, on average, four times higher than those recorded for other formats;
-the implementation of weighted auction systems, which makes it possible to optimise revenue by addressing a larger group of advertisers;
-search marketing is generally aimed at triggering an immediate action on the part of consumers, but can also be used for building brand image.

Mobile: high potential that is still under-exploited
The mobile phone is currently one of the most commonly owned personal items in the world, with forecasts indicating 3.25 billion users by the end of 2007.

Despite its many assets, mobile currently accounts for less than 1% of ad spending, even though investments in the medium increased by 75% between 2006 and 2007. Plus, spending on mobile advertising is very localised, with Japan accounting for 53% of all mobile investments and the United States for 27%.

It is true that for mobile ad revenue to increase there needs to be a rise in the rate of 3G/3G+ equipment and in actual consumption, which will undoubtedly be spurred by better pricing policies and the launch of services tailored to mobile browsing. As a result, the mobile internet user base is still too small to attract a large number of advertisers, or to justify massive spending.

In addition, the mobile advertising value chain is currently in the early stages of construction, with new entrants coming on the scene and undermining veteran players’ role in the mobile data services value chain. A variety of cooperation and revenue sharing models are being tested by the players involved but, “until the players reach an agreement that is fair to one and all, the mobile advertising market will not take off” analyses Florence LeBorgne.

A global market expected to reach 6.5 billion EUR in 2012

In five years time, video gaming will be one of the most sought-after applications for mobile phone owners.

In 2012, sales from video game downloads should generate revenues of 3.3 billion EUR in the three largest video game markets (Europe, United States and Japan), and 6.5 billion EUR worldwide.

“The main conditions for change are now becoming established: broadband networks are being deployed, usage is confirmed with new game genres, handsets can now compare with dedicated gaming platforms, publishers are perfecting their editorial strategies and digital distribution services are taking shape” says Laurent Michaud, the report Project Manager.

Mixed but promising markets
Mixed markets can be explained by differences in culture, usage, taste and language, etc… However, they can also be expressed in terms of the technological differences in advanced telecommunications networks and their deployment, business models that exist between content providers and telecoms operators, development environments and more or less standardised operating systems.

3G, already widespread in Japan and South Korea, is now becoming more available in the form of flat-rate data solutions, opening up the practice of mobile Web browsing. Speeds and rollout of pricing models favour the development of online services and content distribution. Gaming is no exception. In Japan and China, at least, business models are sympathetic to content providers and the catalogues they offer are well furnished.

The European market is marked by technological and cultural fragmentation. Players in the worlds of publishing and development are assigning some two-thirds of their development budgets to game porting to handsets and testing. Content is now being ported to up to 1 000 different phones, while games are being localised (translated and adapted) in line with the commercialisation objectives in different European countries.

The North American market is now offering a greater mix. Three major operators are adopting more eclectic catalogues, mainly offered through subscription. The Brew operating system functions as a standardised environment, facilitating content development and its adaptation to handsets.

The mobile phone as a video game console
In hardware terms, three factors are fundamental for gaming to develop on phones.

Storage capacity: this is essential given the growing size of applications and especially traditional video games in 3D. Flash memory is a decisive solution here.

3D display: this aids game immersion. Graphics rendering is also a major purchasing trigger. Still mainly software-based, it should gradually be available on mobile phones in the form of a dedicated chip and 2008 should see the rollout of these new generation phones.

Computation power: video games that require real-time computation also need the corresponding power. Next generation mobile phones will develop power equivalent to an upgraded first generation Playstation. This will take 24 to 36 months to deploy, time enough for game publishers to flesh out their catalogues, harnessing the latest technological developments.